TR Monitor

No credit relief

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Loan interest rates went up to their highest levels in September and October. The peak in TRYand USD-denominate­d rates were seen at the end of September while vehicle and housing loans and euro-denominate­d commercial loans reached their peaks in late October.

In November, credit interest rates declined. The most significan­t decline was in TRY-denominate­d commercial loans, from an average of 35.94 percent, which peaked at the end of September, to 28.94 percent at the end of October.

There is no doubt that interest rates of state banks underlie the rapid decline in TRY-denominate­d commercial loan rates. Other banks were also advised to lower interest rates but it was the the public banks that had the greater impact. Still, with such deep cuts, the average rate only dropped to 28.75 percent. Can anyone seriously claim that 28.75 percent is a good interest rate, or even anywhere close to ideal?

Moreover, 28.75 percent is the overall average. As we mentioned earlier, it is the public banks that pulled down the average. And the fact is: not everyone has the opportunit­y to benefit from the relatively low interest rates of public banks. But ggain, 28.75 percent is the average so lower and higher interest are also applied. Thus, many enterprise­s still face a very high interest rate.

USD- and euro-denominate­d commercial loans and interest rates are lower than TRY-denominate­d loans because the biggest unknown in the Turkish economy is the course of the currency. Still, there has been no significan­t decline in interest rates on FX loans. The interest rate of USD-denominate­d loans at the end of September and on November 16 was 6.96 percent and 6.95 percent, respective­ly. The last rate on November 30 was 6.15 percent. Euro-denominate­d loans, which peaked at the end of October at 5.51 percent, fell only to 4.88 percent on November 30.

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